Businesses step up campaign on gas volatility

Posted on 18 Jun 2013 by Tim Brown

Potential shortages are harming employment say group

Businesses are stepping up their campaign for urgent Government intervention to protect industry from gas shortages.

The escalation follows revelations that UK supplies of gas were dangerously low in March. Uncertainty over supply has already cost UK jobs, and it is harming manufacturers and investment, according to industry leaders.

During March, gas prices varied between 75p per therm and £1.50 per therm as a result of concerns over supply – in particular when an interconnector at the Bacton gas terminal inNorfolkfailed. Earlier in the winter prices were 60p to 65p per therm.

Dr Laura Cohen, chief executive of the British Ceramic Confederation
Dr Laura Cohen, chief executive of the British Ceramic Confederation

Dr Laura Cohen, chief executive of the British Ceramic Confederation, said: “One of our members couldn’t make their products profitably at these extortionate prices.

“They were forced into an additional shutdown, laying off staff as energy is by far their biggest input cost. The Government claims the gas market is working well – it certainly isn’t forUKceramics manufacturers.

“The Government needs to intervene to ensure there is extra gas storage in theUKand a requirement to hold adequate safety stocks. Uncertainty over supply has led to terrible price volatility and that makes investment in new equipment and jobs extremely difficult. Energy security is essential in any modern and industrial economy.”

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Industry leaders believe capital investment is being stifled because of fears over continuity of supply and the resulting price fluctuations.

George Stewart, UK industrial director of clay roof tile manufacturer Monier Group, said: “In March, National Grid rang us and other ceramic manufacturers ‘just to check’ who to call in case they needed to cut off supplies to our site because of gas shortages.

“Had I needed to shut down at a few hours’ notice, we could have damaged the kiln. There needs to be some mechanism that allows phased shutdowns of plant like the large tunnel kilns used by brick and roof tile makers.”

Brickmaker Wienerberger recently completed a multi-million-pound investment in an energy-efficient kiln at its factory in Kingsbury, Warwickshire.

Sustainability director at WienerbergerUK, John Sandford said: “Companies such as ourselves and Monier are foreign–owned. TheUKcompetes with other overseas sites for investment. We need better energy security and price stability to make a case to continue investment.”

Now Dan Byles, MP for North Warwickshireand Bedworth and member of the Energy & Climate Change Select Committee, has backed the calls for improved gas storage and security.

Talking after visiting Wienerberger’s Kingsbury site, Mr Byles said: “I saw how important energy security is to firms like Wienerberger. If they lose gas or electricity, they run the risk of major structural damage to their plant.

“I will be speaking to Energy Minister, Michael Fallon. The Government has to work with suppliers to come up with a way of protecting gas provision and ironing out damaging gas price volatility.

“Significant investment in gas storage with a requirement to use it has to be investigated as a matter of urgency. I want to keep manufacturing businesses, jobs and investments in theUKand in my constituency.”

The Department of Energy and Climate Change is reviewing whether it needs to intervene in theUKgas market and, if so, what form that intervention should take. A decision is expected this month.

As coal-fired electricity generation is scaled back to meet green targets, gas-fired stations will initially make up much of the shortfall. In addition, increased reliance on intermittent renewable energy will see more gas-generated electricity being used as back-up. IndigenousUKgas supply continues to reduce. All these factors, many industry commentators believe, could exacerbate gas shortages.